Saving for Retirement: Why Is It A Struggle?

This isn't going to be a post where I pull out all sorts of scary statistics about our lack of savings and the problems ahead as millions of Boomers join the already-retired. I'm not going to give you a detailed plan for having a financially comfortable, satisfying retirement. There are thousands of web sites, blogs, and books that can help you with financial planning if that is what you decide you need. 

What I would like to do is offer some reasons why we simply can't seem to do what we know we must do: save enough for our post-working life. If we recognize what the obstacles are there is a chance that these problems can be minimized.

I ran across an article by Jennifer Derrick from several years ago on her web site, SavingsAdvice.com. She offered an interesting explanation of what may be part of the problem:

"It’s only been in the last two hundred years or so that technology and medical care have evolved to the point where we now have the luxury to think about the future. Unfortunately, now that we can think about the future, we aren’t fully prepared to deal with it. We have no trouble envisioning the future and thinking about it in abstract terms. However, when it comes to taking action, we are still hampered by our ancient selves. We want to take action and we know we should, but the ancient part of our brain is still saying, “Why bother? We might not be here tomorrow and, even if we are, the future is so far away as to be less important than what’s going on today."

Her point would explain why various levels of government can acknowledge a problem but can only agree to delay a solution until someone else has to worry about it. As far as saving for retirement I'm not sure I fully accept her argument that it is really a question of evolution, that we are not prepared to think about the future in action-oriented terms. But, she raises an interesting argument.

Whatever the cause, the fact is clear: the majority of us do not save enough for our financial health. I have a few ideas why I believe this is a problem in search of a solution. See if any of these make sense to you.

Expenses will be lower when we retire

This argument has been "common knowledge" for decades. It sounds reasonable. After all, your clothing, lunch expenses, and commuting costs will certainly be less if you aren't going to work everyday. It is likely you won't be paying for your kids' education or other expenses.

But, I think the premise is dangerously flawed if taken without thinking about your own situation. No matter how good your health insurance or what happens in the future with Congress, your health care costs will go up as you age. A study just released says that a couple over 65, even with Medicare and Part D coverage, will need close to $250,000 to pay for their care.

You will continue to buy cars and probably pay on your mortgage at least part way into your retirement. You are likely to travel more and spend more on entertainment. Food, cable and phone costs, heating and cooling...all the normal expenses of living will not decrease when you stop working, they will continue to increase just as they always have. My experience does show a noticeable drop in expenses after retirement, but it did not happen automatically. It took judicious cuts.

I can work as long as I want to make extra money

If your present position seems safe, talk to any of the millions of unemployed who thought they were secure. The economy has undergone a drastic change over the past decade and a half and isn't likely to ever go back. More productivity with fewer employees is the new norm. You may not have any say in the matter.

A much more realistic appraisal is to assume you won't have full control over when you retire, so preparing while still working is the only prudent decision you can make. If you are thinking about part time employment even that may be difficult if you are over 50. Certainly, it can be done, and an increasing number of seniors are finding work. But, something close to minimum wage and part time is the most likely option.

The future is out of my control so what can I do?

The events since 2008 certainly seem to support this argument. The rules we play by are quite different from the rules the big boys adhere to. All our planning and investments can be wiped out and we can do very little to stop it. So, why not just live for today?

OK, but who takes care of you tomorrow? This approach assumes society, or a rich relative, or someone, will be there when that future does arrive. That strikes me as a huge gamble.

My parents will leave me a lot of money

Maybe, maybe not. Are they completely immune to bad investments or failing health with large bills? Can you really build your future around an undetermined amount of money you may inherit at some point in the future?

My parents did leave me and my two brothers an amount that will help the three of us (and our kids) tremendously. But, I didn't retire 16 years ago with that as a cornerstone of my plans. When it happened it was very welcome. But, I didn't build my future around it.

I'm already retired. My worries are over

The need to save, invest, budget, adjust, and look for alternative sources of income doesn't stop when you retire or when that first Social Security check arrives. The need to monitor your financial well-being and do what is needed to stay healthy never stops. Financial planning is as necessary at 70 or 80 as it is at 30 or 40. If you missed it, review Should You Continue To Invest After Retirement?

Add to the above excuses the fact that giving up something today so we have something tomorrow is unpleasant. It goes against our instinct for procrastination and instant gratification. But, just like the infamous Titanic, nothing is unsinkable. Saving and investing for a satisfying retirement are a must.

So, how do your plans look?